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News: The Union Cabinet has approved the continuation of Credit Guarantee Fund for Micro Units (CGFMU) for a period of five years.
About Credit Guarantee Fund for Micro Units (CGFMU)
- Credit Guarantee Fund for Micro Units (CGFMU) provides credit guarantee coverage to the Lending Institutions through National Credit Guarantee Trustee Company Limited (NCGTC) against default risk.
- Managing agency: The scheme will be implemented by National Credit Guarantee Trustee Company Ltd (NCGTC).
- Timeline: The Scheme would be applicable to all loans extended under PMMY during the 16th Finance Commission Cycle i.e. FY 2026-27 to FY 2030-31.
- The extension of the scheme will enable loans of Rs. 12.6 lakh crore over the next five years.
- Features: The purpose of the fund is to provide guarantee to Lending Institutions (LIs) for the following credit facilities:
- Loans extended to eligible micro enterprises under Pradhan Mantri Mudra Yojana (PMMY) upto Rs.20 lakh;
- Overdraft of upto Rs.10,000 provided by banks under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts; and
- Loans granted to Self Help Group (SHG) where portfolio is between Rs.10 lakh to Rs.20 lakh.
- Guarantee coverage: It is linked to the disbursement amount in case of working capital limits and outstanding amount for term loan accounts to reflect the actual risk exposure of LIs.
- Guarantee Fee: Decrease in guarantee fee from @1% p.a. to @ 0.75% p.a.
- No change for SHG; continue to pay guarantee fee of 0.25% for the first year and 0.50% in subsequent years.
About Pradhan Mantri Mudra Yojana (PMMY)
- Pradhan Mantri MUDRA Yojana (PMMY) was launched for providing loans up to Rs.10 Lakh to the non-corporate, non-farm small/micro enterprises.
- MUDRA, which stands for ‘Micro Units Development & Refinance Agency Ltd’, is a financial institution set up under PMMY for development and refinancing micro unit enterprises.
- Launch year: It was launched in year 2015.
- Aim: PMMY aims to provide financial inclusiveness and support to the marginalized and hitherto socio-economically neglected classes.
- Nodal Ministry: The nodal ministry for the scheme is Department of Financial Services, Ministry of Finance.
- Activities: The loans are given for income generating activities in manufacturing, trading and services sectors and for activities allied to agriculture.
- Loans offered by: Under PMMY, collateral free loans of up to Rs. 10 Lakh are extended by Member Lending Institutions (MLIs) viz Scheduled Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) etc.
- Categories: MUDRA loans are offered in three categories as following:
| Category | Loan Amount | Target Segment | Share of Total Loans | Key Sectors Funded |
| Shishu | Up to ₹50,000 | First-time entrepreneurs, nano-units | ~88% of total loans | Street vendors, tailoring, petty shops, dairy, home-based work |
| Kishore | ₹50,001–₹5 lakh | Small-scale expansion, working capital | ~9–10% of total loans | Food stalls, repair shops, beauty parlors, transport |
| Tarun | ₹5–₹10 lakh | Growth-stage small businesses | ~2% of total loans | Manufacturing, logistics, services, retail stores |
| Tarun Plus | Loans above ₹10 lakh and up to ₹20 lakh | Designed specifically for Tarun category, who have previously availed and successfully repaid loans | ||
